Not much relief to come from future interest rate announcements

Debt holders are likely to be on the edge of their seats ahead of the next interest rate announcement, which is set to be held on 27 March 2024. The promise of an interest rate cut has been floating around for some time now, but this next announcement might just see the promise realised.

Although hopeful that March might be the month that we see a 0.25% drop, Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, warns consumers not to expect any dramatic rate cutting cycle to begin. “Many economists predict that at best, interest rates will only come down by 1% over the course of the year, which will still leave us at a higher rate than we were pre-Covid.”

Focusing on the positive, Goslett says that even a 0.25% drop in interest rates can go a long way towards relieving some of the financial pressure many households are undoubtedly facing.

However, if we do experience a cut, Goslett advises consumers to work wisely with any money that is freed up as a result. “If you can afford to keep your repayments where they were before the cut, then I would strongly recommend that you do so, as this will help you to pay off the debt faster and reduce the amount of interest payable over the loan term,” says Goslett.

Shifting the focus onto what this would mean for the property market, Goslett does not expect that market conditions will be too noticeably impacted even if there is a small interest rate cut in March. “The cut might give some buyers a bit more confidence to proceed with their property purchases, but for the most part, I would expect that affordability will remain a problem and that activity might remain muted in some areas as a result,” he predicts.

While some areas will continue to be hamstrung by the high interest rates, Goslett notes that other areas that attract cash buyers are likely to remain active. “Because interest rates are so high, buyers are relying less on home financing. The semigration trend also means that buyers can sell their homes in one province and use the cash to purchase a new home in another province.”

Although property market conditions are unlikely to be too largely impacted if interest rates are cut by 0.25% at the next meeting, Goslett is still rooting for this outcome, as it will be the first step towards greater growth within the property sector as a whole.

“Even if we see one or two cuts during the year – which will bring some much-needed financial relief – interest rates are likely to remain high for the foreseeable future. My advice for consumers is to plan and prepare themselves for this fact and to keep in touch with a local agent to stay informed of any good real estate opportunities as and when they arise,” Goslett concludes.

Writer: Kayla Ferguson